Low-cost carrier JetBlue Airways (NYSE:JBLU) will be extending its overseas operations through a new international facility called T5i at John F. Kennedy International Airport (JFK). The carrier has received approvals from Port Authority of New York and New Jersey’s Board of Commissioners to create an international services facility at the JFK Terminal 5. Recently, JetBlue’s rival Southwest (NYSE:LUV) also received approval for the initiation of a secondary international services facility at Houston’s Hobby Airport. JetBlue is the largest domestic airline at JFK presently, and the addition of an international facility will further strengthen its foothold at this airport.
Buoyed by this encouraging news and plummeting oil prices, the company’s stock has seen support. The Trefis price estimate for JetBlue is $8.84, which indicates 70% upside from the current market price.
JetBlue operates mainly at Newark International Airport and JFK Airport, which are two of the busiest domestic airports in the U.S. The airline commands around 40% of all airport traffic at JFK. Currently, JFK’s terminal 5 doesn’t facilitate international services, as a result of which, JetBlue flights have to transfer passengers from T5 to other terminals. The launch of JFK T5i covering 145,000 sq.ft. of space will alleviate this problem and benefit the carrier through a dedicated customs and immigration facility. The new terminal will also facilitate handling of wide-body aircraft operated by partner airlines.
Attracting investments worth $200 million from JetBlue, the construction for this terminal is targeted to complete by early 2015. While the launch of international services at T5 will help JetBlue achieve operational efficiencies, it will also be provisioned with dedicated gates for accommodating international arrivals. In addition to operational advantages, the project ensures improved customer experience and presents tremendous growth opportunities on the international front.
According to our analysis, the carrier derives nearly 50% of its value from international operations, and JFK 5i will further boost the share of its international services segment.